The Big Picture - GDP and GNP

Trends in Basic
Macroeconomic
Aggregates for India
BY
ANSHU KUMAR | ASHISH GHILDIYAL | AKSHAT BALI | KAPIL JOSHI
The Big Picture- GDP
and GNP
GDP (Gross Domestic Product):
GDP is the total market value of all final
goods and services produced within a
country's borders.
Emphasize that GDP measures
production, regardless of who owns the
productive assets.
GNI (Gross National Income):
GNI is the total income earned by a
country's residents, including those
living abroad, minus the income earned
by foreign residents within the country.
Highlight that GNI focuses on income
generated by the country's residents,
irrespective of their geographic
location.
Living Standards: Unveiling
India's GDP per Capita
GDP per capita: A vital gauge of a nation's well-being. It reveals the average income
earned by each resident, offering a glimpse into living standards. Let's explore India's
story through this lens.
India’s GDP per capita
2005 2015 2023

$710 $1590 $2612
This translates to a remarkable

annual growth rate of around
7.5%, propelling India towards a
more prosperous future.
Engines of Growth - Composition
of Aggregate Demand
Aggregate demand represents the total spending in an economy
for goods and services within a given period. Imagine it as the
collective purchasing power of consumers, businesses, and the
government.
Key Macroeconomic Indicators
Aggregate Household Savings
A nation's future investments rely heavily on
household savings. Household savings refer to money
left after the household pays taxes and spends on the
consumption of goods and services. Components-
Household savings has three components. Financial
assets- Currency, bank deposits, pension, insurance,
equity and related products.
Government Budget Deficit Sectoral Composition of GDP

The situation when a government's total expenditures The services sector accounts for 53.33% of total India's
exceed its total revenues during a specific period, GVA of 247.43 lakh crore Indian rupees. With GVA of
typically a fiscal year. It indicates that the government Rs. 69.89 lakh crore, the Industry sector contributes
is spending more money than it is earning through 28.25%. While Agriculture and allied sector share
various sources, such as taxes, fees, and other revenue 18.42%.
streams.
Trends in India’s BOP
The Balance of Payments (BOP) serves as the ledger for this
bustling trade, meticulously recording all international
financial transactions. It's akin to a financial scoreboard,
reflecting a country's economic health and its interactions
with the global economy.
The BOP is broadly divided into three main accounts:
1.Current Account: This is the heart of the BOP, showcasing
a country's trade in goods and services, as well as income
receipts and payments. Think of it as the daily transactions
in your shopping list.
2. Capital Account: This account tracks all international
capital flows, like foreign direct investment (FDI) in
businesses, portfolio investments in stocks and bonds, and
government loans. Think of it as borrowing or lending
money to your international friends.
3. Foreign Exchange Reserves: These are the foreign
currency assets held by the central bank to manage
exchange rate fluctuations and meet external obligations.
Think of it as keeping some spare change in various
currencies for unexpected international expenses.
Dynamics of India’s
Current Account
Unveiling the Current Account: A Breakdown of India's Trade,
Services, and Remittances
1. Trade Balance: Imports vs. Exports
Exports: The value of goods and services that India sells to other
countries. Think of it as India earning foreign currency by
sharing its products with the world.
Imports: The value of goods and services that India buys from
other countries. Think of it as India spending foreign currency
to acquire products it needs or desires.
Current trend: India typically runs a trade deficit, meaning imports
exceed exports.
2. Remittances: A Lifeline from Abroad
Millions of Indians work abroad, sending a portion of their earnings
back home as remittances. These inflows play a crucial role in:
Boosting household income and consumption
Reducing poverty and inequality
Supporting rural development
Current trend: India ranks among the top remittance-receiving
countries globally.
Evolution of India’s Capital Account
The threads of Capital Account’s main components are: Foreign Direct Investment
(FDI) and Portfolio Investment.
1. Foreign Direct Investment 2. Portfolio Investment: A

(FDI): Building Businesses, Dance of Stocks and Bonds
Building Relationships
Increased investment and job creation: New

Diversification: it exposes Indian companies to
businesses translate to employment opportunities,
international investors, potentially enriching access
boosting economic activity and income generation.
to capital and boosting valuations.
“technology and knowledge transfer” Foreign
Market efficiency: Foreign participation can
companies often bring new technologies and
increase liquidity and bring best practices to Indian
management practices, enhancing skills and efficiency
financial markets.
in India.
Infrastructure development: FDI can incentivize Current trends: India's portfolio inflows have been
investments in sectors like power, transportation, and volatile, fluctuating with global market sentiments
telecom, propelling overall infrastructure progress. and domestic policy changes
Current trends: India has seen a surge in FDI inflows in
recent years
India’s Foreign
Exchange Reserves
Foreign exchange reserves, akin to a shield protecting a nation's economic fortress, play a crucial
role in India's external stability and resilience. Let's explore the factors influencing changes in these
reserves and understand their paramount importance for a thriving economy.
Current Account Balance: This fundamental Capital Account Inflows: Foreign direct
driver reflects the difference between exports investment (FDI) and portfolio investments
and imports, along with income flows like bring in foreign currency, adding to reserves.
remittances. A surplus generates inflows, However, sudden outflows during global
boosting reserves, while a deficit draws them market turmoil can deplete them rapidly.
Factors
down.
Shaping
Central Bank Interventions: The central bank the External Debt Payments: When India repays
can buy or sell foreign currency in the market Landscape its foreign loans, it leads to outflows of foreign
to manage exchange rates and stabilize currency, reducing reserves. Conversely,
reserves. They may intervene to smooth out receiving loans adds to reserves temporarily
volatile fluctuations or build buffers during
uncertain times.
Key Takeaways
Positive Growth: India boasts a remarkable
GDP growth trajectory
Rising Living Standards: GDP per capita has
quadrupled in recent decades
Shifting Engine: Consumption remains the
key driver of demand
Current Account: A persistent trade deficit is
offset by a surplus in services and robust
remittance inflows
Capital Account: FDI has surged, driven by
liberalization and promising sectors, while
portfolio investments remain volatile
Foreign Exchange Reserves: Growing reserves
provide a safety net for exchange rate
stability and external shocks
Thank you !

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Trends in Basic

India’s GDP per capita

2005 2015 2023

This translates to a remarkable

Government Budget Deficit Sectoral Composition of GDP

1. Foreign Direct Investment 2. Portfolio Investment: A

Increased investment and job creation: New

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